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Sydnee Gatewood
Sydnee Gatewood
Articles (513) 

Prem Watsa Picks Up 6 Stocks in 4th Quarter

Guru’s largest new purchase was telecom company CenturyLink

Prem Watsa (Trades, Portfolio)’s Fairfax Financial Holdings disclosed its fourth-quarter portfolio on Wednesday, listing six new positions: CenturyLink Inc. (NYSE:CTL), Signature Bank (NASDAQ:SBNY), Centennial Resource Development Inc. (NASDAQ:CDEV), Fluor Corp. (NYSE:FLR), Carlisle Companies Inc. (NYSE:CSL) and Ensco PLC (NYSE:ESV).

Known as Canada’s Warren Buffett (Trades, Portfolio), Watsa, who invests the float of his insurance conglomerate much like his American peer, manages a portfolio of 44 stocks, which is largely composed of securities in the technology and basic materials sectors.

CenturyLink

Watsa’s largest trade for the quarter was a 1.43 million-share stake in CenturyLink. He purchased the shares for an average price of $16.99 per share, giving it 1.68% portfolio space.

The Monroe, Louisiana-based telecom company has a market cap of $18.79 billion; its shares were trading around $18.92 on Thursday with a price-earnings (P/E) ratio of 30.31, a price-book (P/B) ratio of 0.75 and a price-sales (P/S) ratio of 0.57.

The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.

1518646596847.png

CenturyLink’s financial strength ranks a modest 4 out of 10, according to GuruFocus. Its Altman Z-score of 0.74 suggests the possibility of bankruptcy in the next 48 months. Its profitability and growth is rated 6 of 10 due to its moderate Piotroski F-score of 4, low business predictability rank of one star and its expanding operating margin, which is ranked higher than 59% of other companies in the industry.

Of the 15 gurus invested in CenturyLink, Mason Hawkins (Trades, Portfolio) has the largest position with 6.7% of outstanding shares. Other top guru shareholders include Jeremy Grantham (Trades, Portfolio), George Soros (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) , Mario Gabelli (Trades, Portfolio) and Steven Cohen (Trades, Portfolio).

Signature Bank

The guru invested in 15,000 shares of Signature Bank for an average price of $131.62 per share, expanding the portfolio 0.15%.

The New York-based commercial bank has a market cap of $8.41 billion; its shares were trading around $154 on Thursday with a price-earnings ratio of 21.44, a price-book ratio of 2.12 and a price-sales ratio of 6.61.

According to the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.

1518648235589.png

As a result of a high level of long-term debt and low interest coverage, Signature’s financial strength is rated 3 out of 10. However, operating margin expansion and a high predictability rating result in a high profitability and growth rating of 7 of 10, according to GuruFocus.

With 0.38% of outstanding shares, Jerome Dodson (Trades, Portfolio) is the company’s largest guru shareholder. Jim Simons (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also own the stock.

Centennial Resource Development

Watsa picked up 80,000 shares of Centennial Resource Development for an average price of $19.41 per share. The trade had an impact of 0.11% on the portfolio.

The Denver-based oil company, which has operations in the Delaware Basin of West Texas, has a market cap of $5.3 billion; its shares were trading around $19.20 on Thursday with a price-earnings ratio of 137.13, a price-book ratio of 1.93 and a price-sales ratio of 14.58.

Based on the Peter Lynch chart below, the stock appears to be trading well above its fair value, suggesting it is overpriced.

316682019.png

While Centennial’s financial strength is rated 6 out of 10 by GuruFocus due to its strong interest coverage and high Altman Z-score, its profitability and growth is rated 2 of 10 as it has poor earnings quality.

Chuck Royce (Trades, Portfolio) is the company’s largest guru shareholder with 0.04% of outstanding shares. Cohen and Barrow, Hanley, Mewhinney & Strauss also established positions in the stock in the fourth quarter, while Jones added to his holding.

Fluor

The investor purchased 26,000 shares of Fluor for an average price of $46.52 per share, giving it 0.09% portfolio space.

The Irving, Texas-based engineering and construction company has a market cap of $8.13 billion; its shares were trading around $58.09 on Thursday with a price-earnings ratio of 40.63, a price-book ratio of 2.47 and a price-sales ratio of 0.42.

The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.

1518708566730.png

GuruFocus rated Fluor’s financial strength 6 out of 10, driven by a high Altman Z-score and moderate interest coverage. Its profitability and growth is rated 5 of 10, boosted by its Piotroski F-score of 7 and expanding operating margin.

Of the gurus invested in Fluor, Hotchkis & Wiley has the largest holding with 1.34% of outstanding shares. John Rogers (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), John Buckingham (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Dodge & Cox and Barrow, Hanley, Mewhinney & Strauss also own the stock.

Carlisle Companies

Having previously closed a position in Carlisle Companies in the second quarter of 2017, Watsa’s firm established a new holding of 1,900 shares for an average price of $108.97 per share. The trade had an impact of 0.02% on the portfolio.

The Charlotte, North Carolina-based manufacturer, which produces a variety of products for the construction, agriculture, mining, aerospace, defense and several other industries, has a market cap of $6.63 billion; its shares were trading around $106.97 on Thursday with a price-earnings ratio of 18.74, a price-book ratio of 2.73 and a price-sales ratio of 1.77.

According to the Peter Lynch chart below, the stock is overpriced as it is trading above its fair value.

1518709779340.png

Due to Carlisle’s high Altman Z-score and moderate interest coverage, GuruFocus rated the company’s financial strength 6 out of 10. Its profitability and growth was rated 7 of 10 as a result of its expanding operating margin, which is higher than 83% of competitors, and its Piotroski F-score of 6.

With 1.33% of Carlisle’s outstanding shares, Pioneer Investments (Trades, Portfolio) has the largest holding among the gurus. During the quarter, Cohen and Tom Russo (Trades, Portfolio) also established positions in the stock.

Ensco

Watsa bought 14,080 shares of Ensco PLC (NYSE:ESV) for an average price of $5.54 per share, expanding the portfolio 0.01%.

The U.K.-based offshore drilling contractor has a market cap of $2.17 billion; its shares were trading around $4.97 on Thursday with a price-book ratio of 0.18 and a price-sales ratio of 0.75.

Based on the Peter Lynch chart below, the stock appears to be trading slightly above its fair value. This suggests it is overpriced.

1518710747750.png

Ensco’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. The company’s low Altman Z-score of 0.79 indicates the company could face bankruptcy within the next two years. While it has strong operating margins, Ensco’s Piotroski F-score of 4 and one-star business predictability rating suggest its earnings need to become more stable.

Of the seven gurus invested in Ensco, David Einhorn (Trades, Portfolio) has the largest position with 2.22% of outstanding shares. Arnold Van Den Berg (Trades, Portfolio), Cohen, Hotchkis & Wiley and Pioneer Investments (Trades, Portfolio) also own the stock.

Other trades

During the quarter, Watsa also added to his firm’s holdings in RPX Corp. (NASDAQ:RPXC), NetEase Inc. (NASDAQ:NTES), FreightCar America Inc. (NASDAQ:RAIL), Argan Inc. (NYSE:AGX) and Stratasys Ltd. (NASDAQ:SSYS).

He also closed 10 positions and reduced three others.

Disclosure: No positions.

About the author:

Sydnee Gatewood
I am an editorial assistant at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneeg

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